Policy Paper 05/2018

A regulatory framework for venture capital funds in Belarus

Executive Summary

  • Belarus has considerable potential through innovative start-ups. Even though the sector has grown rapidly in recent years financing constraints remain a serious obstacle, and the established banks are not suitable to meet the needs of the sector.
  • The sector will therefore continue to depend on so-called business angels, and on funds raised by larger entities in foreign markets and channelled back to Belarus. The investment by foreign investment funds in Belarus is minimal at present.
  • In developing a regulatory framework for financing of the innovative economy all stages of funding should be covered. There needs to be a continuity of financing that covers seed finance and early growth up to the expansion phase once a commercial concept is proven. Multiple conditions in the legal and financial market framework need to be addressed for this purpose, in particular the role of state banks and corporate governance.
  • The authorities should also make an effort to develop a regulatory framework for investment funds within Belarus. This legislation should be broad, covering all stages of equity financing. Sector specific preferences for venture capital should be kept to a minimum.
  • At present this legislation should rely on minimal standards developed by international organisations for emerging markets that secure disclosure and some investor protection. But only experienced investors and individuals will be active in this market and based on sound information, and the industry poses very few concerns for financial stability.
  • There is no need to copy the very complex EU law for professional investors.
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